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Gold to reach 1,450 dollars by year-end, says Capital Economics

Despite gold prices having already risen by nearly 10 per cent since the start of 2014, Capital Economics predicts that bullion will see more gains over the course of the year.

The research firm said that while the 2011-high of $1,900 an ounce may be unlikely any time soon, it is comfortable with its 2014 year-end forecast of $1,450 an ounce, representing around 6% upside from current prices.

Analyst Julian Jessop said that gold will be boosted by strong demand from China and an eventual easing of restrictions on gold imports in India.

"In the meantime, safe-haven demand for gold has revived a little as a result of the turmoil in emerging markets," he said.

Gold for April delivery was trading over 1.3% higher at $1,317.50 an ounce on Friday afternoon, compared with the $1,200 level at the end of 2013.

Jessop said that the recent rally has been helped by softer US economic data, though this support should begin to fade as the recovery gathers pace and the Federal Reserve continues to taper quantitative easing. Meanwhile, rising real US interest rates over the next few years will remain a "powerful headwind" against the price of the yellow metal, he said.

Nearer term, Jessop said there is "decent support" for gold at around the $1,200 mark, a price at which a "significant proportion of gold mines become unprofitable".

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